Highlights

First Quarter:

• GAAP EPS from continuing operations of $1.06; Operating (non-GAAP) EPS of $1.77
• Revenue of $17.7 billion, up 1 percent (down 2 percent adjusting for currency)
  -- Cloud & Cognitive Software up 4 percent (up 1 percent adjusting for currency)
  -- Systems up 4 percent (up 2 percent adjusting for currency)
  -- Global Business Services up 2 percent (down 1 percent adjusting for currency)
• Total cloud revenue of $6.5 billion, up 21 percent (up 18 percent adjusting for divested businesses and currency) 
  -- Cloud revenue of $26.3 billion over last 12 months, up 19 percent (up 18 percent adjusting for divested businesses and currency)
• Red Hat revenue up 17 percent (up 15 percent adjusting for currency), normalized for historical comparability
• GAAP gross profit margin of 46.3 percent, up 120 basis points; Operating (non-GAAP) gross profit margin of 47.3 percent, up 110 basis points
• Net cash from operating activities of $4.9 billion, up $0.4 billion; adjusted free cash flow of $2.2 billion, up $0.8 billion 
  --  Over last 12 months: Net cash from operating activities of $18.6 billion; adjusted free cash flow of $11.6 billion
• Debt reduced by $5.1 billion since year end 2020
   

ARMONK, N.Y., April 19, 2021 - IBM (NYSE: IBM) today announced first-quarter 2021 earnings results.

“Strong performance this quarter in cloud, driven by increasing client adoption of our hybrid cloud platform, and growth in software and consulting enabled us to get off to a solid start for the year," said Arvind Krishna, IBM chairman and chief executive officer.  "While we have more work to do, we are confident we can achieve full-year revenue growth and meet our adjusted free cash flow target in 2021.”

“In the first quarter we continued to improve the fundamentals of our business model," said James Kavanaugh, IBM senior vice president and chief financial officer.  "With strong cash generation and disciplined financial management, we increased investments in our hybrid cloud and AI capabilities, while significantly deleveraging in the quarter and supporting our commitment to a secure and growing dividend.” 

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.9 billion, or $2.1 billion excluding Global Financing receivables.  IBM’s free cash flow was $1.5 billion, which includes $0.6 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of the managed infrastructure services business.  IBM’s adjusted free cash flow, excluding these cash impacts, was $2.2 billion.  The company returned $1.5 billion to shareholders in dividends.

Over the last 12 months, the company generated net cash from operating activities of $18.6 billion.  IBM’s free cash flow for the last 12 months was $11.0 billion.  The company’s adjusted free cash flow, excluding cash impacts as described above, was $11.6 billion.

IBM ended the first quarter with $11.3 billion of cash on hand (includes marketable securities), down $3.0 billion from year-end 2020.  Debt, including Global Financing debt of $18.3 billion, totaled $56.4 billion, down $5.1 billion since the end of 2020, and down $16.6 billion since closing the Red Hat acquisition. 

Segment Results for First Quarter

• Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive Applications and Transaction Processing Platforms) — revenues of $5.4 billion, up 3.8 percent (up 0.8 percent adjusting for currency).  Cloud & Data Platforms grew 13 percent (up 10 percent adjusting for currency), led by the company’s hybrid cloud platform and Cloud Pak growth.  Cognitive Applications grew 4 percent (up 2 percent adjusting for currency), led by growth in Security.  Transaction Processing Platforms declined 12 percent (down 15 percent adjusting for currency).  Cloud revenue up 38 percent (up 34 percent adjusting for currency).  Gross profit margin up 60 basis points.
• Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.2 billion, up 2.4 percent (down 1.4 percent adjusting for currency), with growth in Consulting and Global Process Services.  Application Management revenue declined.  Cloud revenue up 33 percent (up 28 percent adjusting for currency).  Gross profit margin up 100 basis points.
• Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.4 billion, down 1.5 percent (down 5.3 percent adjusting for currency).  Infrastructure & Cloud Services and Technology Support Services declined.  Cloud revenue up 6 percent (up 2 percent adjusting for currency).  Gross profit margin up 60 basis points.
• Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.4 billion, up 4.3 percent (up 2.2 percent adjusting for currency), led by IBM Z, while Power and Storage Systems declined.  Operating Systems Software declined.  Cloud revenue up 23 percent (up 21 percent adjusting for currency).  Gross profit margin up 430 basis points.
• Global Financing (includes financing and used equipment sales) — revenues of $240 million, down 20.0 percent (down 21.9 percent adjusting for currency), driven by lower financing volumes and sale of receivables.

Full-Year 2021 Expectations

The company expects to grow revenue for the full year 2021 based on mid-April 2021 foreign exchange rates.  The company also expects adjusted free cash flow of $11 billion to $12 billion in 2021.  Adjusted free cash flow expectations exclude approximately $3 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of the managed infrastructure services business.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance.  These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the possibility that the proposed separation of the managed infrastructure services unit of the company’s Global Technology Services segment will not be completed within the anticipated time period or at all, the possibility of disruption or unanticipated costs in connection with the proposed separation or the possibility that the separation will not achieve its intended benefits; the company’s ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects from environmental matters, tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.  Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

• adjusting for currency (i.e., at constant currency);
• total cloud revenue adjusting for divested businesses and currency;
• Red Hat revenue normalized for historical comparability;
• presenting operating (non-GAAP) earnings per share amounts and related income statement items;
• net cash from operating activities, excluding Global Financing receivables;
• free cash flow;
• adjusted free cash flow.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8‑K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-1q21. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contacts:

IBM 
Sarah Meron 
1 (347) 891‑1770
sarah.meron@ibm.com

John Bukovinsky
1 (732) 618‑3531
jbuko@us.ibm.com